When I checked the National Debt Clock (www.brillig.com/debt_clock) it was at $7.9 trillion and climbing. It rises at a rate of $1.54 billion a day.
Something just didn't sound right when the Secretary of the Treasury, John W. Snow, told the press that the United States had more than enough money to handle the initial estimate of $200 billion it would cost to rebuild New Orleans and the other areas of the Gulf Coast hit by Hurricane Katrina.
For one thing, all such estimates are suspect and usually turn out to be less than the final, higher costs. Contrarians, however, argue that the estimates may be too high. In short, no one really knows. As reconstruction begins, money will flow to the affected areas and life, one hopes, will return to normal, along with the vital economic factors that include the traffic of goods on the Mississippi and the generation of oil and natural gas from the Gulf.
The deficit differs from the debt because the deficit is the annual differential between what the government is taking in and what it is paying out during a fiscal year. The US has a deficit of $333 billion as of fiscal 2005 that ends on September 30. Fiscal 2006 that begins October 1 has a deficit of $341 billion as cited by the White House office of Management and Budget. The prospect of $500 billion seems like an awful lot of money. And that's before the costs of Hurricane Rita are even calculated.
The President says he has no intention of asking Congress to raise taxes to help reduce it, causing an outcry from those for whom raising taxes is the answer to everything. As Richard W. Rahn, a Cato Institute scholar, noted in a recent opinion published by the Washington Times, "The tax increase proponents seemingly cannot grasp that taxes reduce our economic vitality. When taxes rise, the economy slows." And with it the amount of money the government receives.
Bush has received substantial criticism for the spending policies his administration has endorsed, but the1988 Stafford Act, triggered by such catastrophic events, requires the federal government to pay at least 75 percent of the cost of rebuilding public infrastructure such as roads, bridges, along with damaged federal facilities such as military bases. This is vital to restoring the economic viability of the affected areas that, in turn, impacts all other areas of the nation's economy.
Given the extraordinary damage inflicted, Washington Times reporter, Bill Sammon, noted that, "The federal government's share can jump to more than 90 percent," citing events such as Hurricane Andrew in 1992, the Oklahoma City bombing in 1995, and the September 11 attacks.
This is, however, the same federal government that cannot account for $25 billion it spent in 2003. And there is scant reason to believe that Congress will revisit recent spending bills chock full of pork projects.
Rep. Ron Paul (R-Texas) states plainly enough that the government does not have $200 billion to cover the estimated cost of recovery and will either have to borrow it or print it. Borrowing is government's favorite option from the federal to the state level. It seems clear that our children and their children will be paying off this new, additional debt for decades to come.
The question remains; how much debt is too much debt, even for a multi-trillion dollar economy?
George W. Bush won electionjust barelythe first time by promising to cut taxes. Clearly determined not to repeat his father's mistakes, he was reelected primarily on his determination to wage war on our enemies, as opposed to his economic program. Throughout his first term and continuing into his second, President Bush has famously not vetoed a single spending bill and Congress has accommodated him by going on the largest spending spree in US history.
I became more nervous when Tom Delay (R-TX), the House Majority Leader, announced that there was "simply no fat left in the federal budget" from which to cut programs by way of offsetting the $62.3 billion appropriated for Hurricane Katrina relief. Either Delay is deluding himself or he is deluding everyone else by saying such nonsense.
As a September 23 editorial in the Washington Times noted, "The conservative Republican Study Committee has released a detailed 23-page report identifying and explain a menu of more than 100 specific budget offsets that total nearly $1 trillion over 10 years, including $102 billion for 2006 and nearly $400 billion over the next five years."
This year, prior to the bailout contemplated for the victims of Hurricane Katrina, the spending Congress has authorized represents just a tad over $22,000 per household; that's you, me, and everyone else earning a living and paying taxes. The estimated cost of repairing Katrina's and Rita's damage adds an estimated $2,000 more per household.
A President not only needs a sensible economic program, but he also needs a bit of luck. On September 11, 2001, Bush was transformed from a relatively lackluster president who never saw a spending bill he didn't like to a dynamic "war president." Will historians and economists at some future date conclude that Bush's luck ran out when Hurricanes Katrina and Rita hit?
Though there are no immediate signs the economy is in trouble, there are indications that Americans are beginning to seriously worry about it. A consumer economy depends on spending and, if that tightens up, things could get ugly. The most obvious sign of trouble is the increased cost of gasoline, already impacting decisions on how and where to spend money. Minus the refinery capacity the nation needs, the higher costs are going to be around for a long time.
Prior to Hurricanes Katrina and Rita, while taking on terrorism in Afghanistan and Iraq, Bush pushed through spending programs that make the "tax and spend" Democrats of the past look parsimonious. His "No Child Left Behind" education program is a whopping $49 billion with no sign it has actually improved anything than the test-taking skills imposed on seven-year-olds.
The welfare state has now been expanded in the form of pharmaceutical prescription benefits that have been added to Medicare. Oddly, this is occurring at the same time even the President is saying that Social Security will go broke unless "fixed."
And throughout all of this, the cost and numbers of Federal regulations just keep going up and up and up. Writing in June of this year, Rahn noted that, "In inflation-adjusted dollars, the cost of federal regulation has gone from $2.3 billion in 1960 to $38.9 billion expected in this next fiscal year. This is a greater than fourteen-fold increase."
To demonstrate how out of touch with reality some elements of the government are, in the midst of the first efforts to recover from Hurricane Katrina and as Hurricane Rita passed Key West, NASA announced it wants to spend $104 billion over the next decade to send astronauts back to the Moon!
What the rest of us are left with is a world of rising uncertainty. While the strength of the economy is tested, economists will debate Bush's economic policies and the profligate and wasteful spending authorized by members of Congress while ordinary Americans struggle to pay their bills.